New York Governor Kathy Hochul and New York City Mayor Eric Adams announced an agreement on a financial framework between New York State and New York City that will help fund the reconstruction and potential expansion of Penn Station and the expected revitalization of the surrounding area. The framework ensures that the City maintains a current and consistent level of property tax revenue while requiring that funding for the station, vibrant open space, and public realm improvements, come in part from private development. This agreement also affirms the State’s ongoing commitment to rebuilding Penn Station without raising taxes on New Yorkers or fares for transit riders (for now).
As part of the agreement, the City and State have committed to establishing a shared city-state governance entity to oversee public realm improvements and ensure comprehensive and coordinated planning and implementation.
Under the agreement, funds from privately financed development will help pay for a reconstructed Penn Station, the potential expansion of Penn Station, and improvements to the surrounding area that the city-state governance entity will oversee. This includes enhancements to the streets and sidewalks, the creation of new public spaces in the area around the station, and the construction of more seamless transit connections between Penn and nearby subway stations.
The State will sell development rights to private developers and collect payments-in-lieu-of-taxes (or PILOTs) on newly constructed, modern, and environmentally friendly office and residential buildings. The amount of PILOT payments collected in excess of existing property taxes, in addition to revenues from the sale of additional development rights, will help to fund the project.The State and the City have agreed that PILOTs can be used to pay for up to:
- 100 percent of improvements to streets, sidewalks, public spaces, and other elements of the public realm;
- 50 percent of improvements to transit infrastructure including underground concourses and subway entrances in the neighborhood;and
- 12.5 percent of the cost of the reconstruction and potential expansion of Penn Station
The remaining costs would be funded through a combination of sources from the federal government, New Jersey, New York State, Amtrak, and other public funding sources.
To ensure that the City maintains its tax revenue stream, the City will continue to collect amounts equal to current taxes on each development site with a 3 percent increase each year. All buildings will return to the City’s tax rolls after the agreed contributions to project costs are met, or after a period of 80 years (at the latest). Because of the anticipated increase in property values, the City is expected to collect significantly more in tax revenue once the buildings are put back on the City’s tax rolls. The City and State have also agreed to cap any property tax abatements.
It is important to note that good government groups and local officials have criticized the major infrastructure project because it would primarily benefit one developer, Vornado, which owns much of the land in the immediate vicinity of Penn Station.
This announcement comes on the heels of the agreement reached between New York and New Jersey to fund the Gateway Project.